Private Microsoft suits still alive in California

The software giant scores a legal victory when a federal judge tosses out parts of some private antitrust suits, but that doesn't mean the company is in the clear.

Jan. 2, 2002 4:43 p.m. PT

Microsoft may have scored a legal victory last week when a federal judge tossed out parts of some private antitrust suits, but that doesn't mean the company is in the clear when it comes to money damages.

Dozens of private suits still are making their way through the courts in several states including California, where it's much easier to sue companies under antitrust law.

Last week, federal Judge J. Frederick Motz tossed out damage claims in many of the cases consolidated in his Baltimore court, saying a company cannot be sued by people who didn't purchase a product from it directly.

"We are very pleased with the court's decision to dismiss the majority of the lawsuits pending against Microsoft," Microsoft spokesman Jim Cullinan said in a statement after Motz issued his decision. "These lawsuits were not
brought on behalf of consumers but rather by plaintiff attorneys going after a successful company."

So far Microsoft has won the majority of legal rounds in the private cases, getting cases thrown out in at least eight states using the same argument that worked in Motz's courtroom.

But several states, including California, do not subscribe to the so-called indirect purchaser rule. And while Motz threw out 20 of the 63 cases completely and parts of another 18, he let stand several other suits that
came to his courtroom from states that don't have indirect purchaser restrictions.

Eugene Crew, an attorney representing plaintiffs in a separate set of suits moving through California's Superior Court in San Francisco, said he's confident he will prevail against Microsoft despite Motz's ruling.

Crew, who filed the first major private antitrust case against the company, said he pretty much expected Motz's decision to toss out the federal cases because they have a higher hurdle to clear than many state cases.

"I'm not really surprised about that because consumers are not direct purchasers," Crew said, adding that he doesn't think Motz's ruling will harm his case.

But Motz did toss out a federal suit filed in conjunction with Crew's, one that named PC makers in addition to Microsoft and alleged a conspiracy between computer makers and the software company.

"I think that decision was just plain wrong," Crew said.

Unlike the government case, Microsoft faces potential monetary damages in the private cases, damages that could be tripled under antitrust law.

John Lopatka, a University of South Carolina law professor, said last week's ruling was clearly a victory for Microsoft, but the scenario could change on appeal. "It's only the first round, and the circuit court
could certainly reverse it," he said.

What's more, by allowing some of the state cases to continue, Motz may have provided ammunition to lawyers there. "Clearly Judge Motz is saying that actions brought by state lawyers are more viable," Lopatka said.

Whatever the case, it's going to take awhile to resolve the private cases, particularly because the courts will probably await the outcome of the Justice Department's sweeping antitrust case against Microsoft. The
federal case, filed in 1998, led to a breakup order against the company last summer and is now on appeal. The U.S. District Court of Appeals for the District of Columbia is considering filings from both sides and will
make a final decision sometime after hearing oral arguments in February. After that, the loser is sure to appeal to the Supreme Court, a process that could take years.

Meanwhile, it's going to be a waiting game for lawyers in the private cases that are still standing, Lopatka said. The California suits aren't even scheduled for trial until spring 2002.

"I don't know that a court is going to rush to reach a judgment which is
going to be dramatically affected by the government's case," he said.